Pure Raises Big Money to Pull Away from Flash Pack

A race to move flash-based data storage into computer rooms has turned into stampede. But a $150 million venture-capital round seems like a mark of distinction.

So hopes Pure Storage. The Silicon Valley startup calls the infusion being announced Thursday the biggest funding event in the history of enterprise data storage.

Scott Dietzen, Pure’s chief executive, says the investment takes its total raised to date to $245 million. It also takes the company’s valuation to “north of a billion” dollars and should sustain Pure to profitability and an eventual IPO, he says.

Records are hard to confirm, or keep, with the torrent of money flowing into the flash storage market. The action is not limited to private financings; plenty of flash-based startups are being acquired, and Violin Memory is headed toward a public offering initially estimated at $172.5 million.

“People see the opportunities,” says Shane Robison, chief executive at Fusion-io, a pioneer in the sector that has suffered some reverses lately but still sports a market value of more than $1 billion.

It’s not hard to understand the frenzy. Data storage is so vital to every company, and future growth in capacity needs so assured, that the potential revenue from replacing today’s hardware would make any venture capitalist’s eyes light up.

Flash memory chips, as users of devices like smartphones know, are much faster than disk-based storage. The technology also requires less energy to operate and tends to be more reliable, since there are no moving parts to break down.

The rub has been that the cost per byte of data stored on such chips is much higher than on magnetic disks. Pure, however, claims a sort of cost parity with one class of disk-storage systems, the fast-spinning, high-end variety used by companies willing to pay up for performance.

Like a number of other companies, Pure sells a box packed with flash chips to store data. The differentiator, Dietzen says, is particularly advanced software to reduce the data that actually gets stored, based on techniques that reduce duplication of files and compress the number of bits needed to be stored. So companies need to buy less physical storage capacity than they might have to get the job done.

Such developments are ushering in a time that Dietzen and some others compare to another period in recent history, when systems using low-cost disks replaced the need to use tape-based systems for long-term data store. There, too, the technology known as de-duplication played a key role in achieving price parity.

A poster child for that movement was Data Domain, a company that wound up in 2009 selling to EMC after a bidding war for $2.4 billion. Frank Slootman, who was Data Domain’s CEO and now heads ServiceNow, was also one of Pure’s angel investors; he is joining Pure’s board as part of the announcements Thursday.

“The company is on an absolute tear in ramping up the business,” Slootman says. And, with the hefty bankroll, “the company is loaded for bear.”

But won’t a startup like Pure inevitably get steamrolled as big competitors like EMC charge into the field? Slootman thinks it can avoid that fate, but the company will definitely have to move as quickly as can to build its position.

Hence the need for more funding. Dietzen says most of the new money will go to building Pure’s sales efforts. Unlike most others in the flash-based storage area, Pure relies mostly on resellers to move its products to customers rather through direct sales.

That’s one reason Pure claims an unusually broad base of customers, which Dietzen says includes intelligence agencies and companies interested in extreme performance as well as local governments and police departments. “High schools have purchased our system,” Dietzen says.

Pure has also collaborated in some ways with server makers, but they don’t get to resell its hardware. “The issue we’ve had is they like the technology so much that they want to buy us,” Dietzen says. “And we are not for sale.”

The latest funding round is being led by T. Rowe Price and Tiger Global Management, Pure says, along with contributions from Greylock Partners, Index Ventures, Redpoint Ventures, Samsung Ventures and Sutter Hill Ventures.